Beta and MRP

Related BrainMass Solutions

• CAPM (Capital Asset Pricing Model)

  Thus if required returns and beta for two stocks are given then we can determine RFR and MRP.

• Questions on Corporate Finance Company

  rf=6% MRP=5% Beta = 0.70 Required rate of return on stock = re=rf + beta*MRP = 6%+0.70*5%=9.5% D0=$1.80 g=4% Value of stock = P0=D0*(1+g)/(re-g) = 1.80*(1+4%)/(9.5%-4%)=$34.04 2.)

• Figuring the CAPM: What must the expected return be?

  MRP is equal to the difference between the expected return on a market portfolio ( unknown) and the risk-free rate ( 5%).

• Yonan Corporation's Stock: Required Return

  Required return = r* + beta(MRP) Step 2: Compute: Required return = r* + beta(MRP) 11.50% = 5.50% + beta(4.75%) beta = 1.26 Step 3: Get final answer: Required return = 5.50% + 1.26(6.75%) Therefore, the required return = 14.03% The expert calculates

• Calculating the future values and WACC

  Hint: First Solve for Market Risk Premium (MRP) using the avg. firm beta.

• Determining the CAPM: what is the Risk-free rate

  3094 Determining the CAPM: what is the Risk-free rate A stock has an expected return of 20% and a beta of 1.5, and the expected return on the market is 15%. What must the risk-free rate be?

• Expected, Required and Risk Free Rates of Return

  Answer: KRF MRP Beta MRP * Beta Required Rate 5.0% 7% 1.8 12.6% 17.6% Assumptions (apply to all problems): ? The Risk-Free Rate of Return (return on long term treasure securities) is 6.5% ? The expected market rate of return is 14.5%.

• Beta and Rate of Return

  What is the holding company's beta? 2. Assume that the RFR is 5% and MRP is 4%, what is the holding company required rate of return? 3.

• Enterprise value and beta of business assets

  The difference between the market risk (rm) and the risk free rate is the market risk premium, or mrp: r_e=r_f+beta*(mrp) r_e=3%+0.9*(4%) So the required return for equity is 6.6%.